THE WORLD

Iraq Cellular Project Leads to U.S. Inquiry

A Pentagon official acted to award a contract to a group that included his friends.

WASHINGTON — A senior Defense Department official is under investigation by the Pentagon inspector general for allegations that he attempted to alter a contract proposal in Iraq to benefit a mobile phone consortium that includes friends and colleagues, according to documents obtained by The Times and sources with direct knowledge of the process.

John A. Shaw, 64, the deputy undersecretary for international technology security, sought to transform a relatively minor police and fire communications proposal into a contract allowing the creation of an Iraq-wide commercial cellular network that could generate hundreds of millions of dollars in revenue per year, the sources said.

Shaw brought pressure on officials at the U.S.-led Coalition Provisional Authority in Baghdad to change the contract language and grant the consortium a noncompetitive bid, according to the sources.

The consortium, under the guidance of a firm owned by Alaskan natives, consisted of an Irish telecommunications entrepreneur, former officials in the first Bush administration and such leading telecommunications companies as Lucent and Qualcomm, according to sources and consortium members.

Shaw's efforts resulted in a dispute at the Coalition Provisional Authority that has delayed the contract, depriving U.S. military officials and Iraqi police officers, firefighters, ambulance drivers and border guards of a joint communications system.

That has angered top U.S. officials and members of the U.S.-led authority governing Iraq, who say the deaths of many Americans and Iraqis might have been prevented with better communications.

In interviews, Shaw said he had a long-standing personal relationship with at least one member of the consortium, but had no financial ties or agreement with the consortium for future employment. One other member of the consortium's board of directors is under contract with his office as a researcher.

Shaw said he was trying to help the group because it could quickly install the police and fire communications system, and because the group was using a U.S.-based cellphone technology called CDMA that had lost out in what he called a "rigged" competition last year for commercial licenses in Iraq. Three companies using European-based technology won contracts.

Additionally, Shaw said that he had been contacted by Rep. Darrell E. Issa, a Republican whose San Diego County district was packed with Qualcomm employees, and the office of Republican Sen. Conrad R. Burns of Montana, the head of the Commerce Committee's communications subcommittee, urging him to ensure that U.S. technology was allowed to compete for cellular phone contracts in Iraq. Issa confirmed they he had contacted Shaw on the issue. Burns' office did not respond to inquiries.

CDMA, which was developed by Qualcomm, is used in the United States and some countries in Asia. Its rival, a standard developed by Europeans called GSM, is used in the U.S., Europe and the Middle East.

"Hey, we won the war," Shaw said in an interview. "Is it not in our interests to have the most advanced system that we possibly can that can then become the dominant standard in the region?"

The Pentagon's Defense Criminal Investigative Services, a unit of the inspector general, began its investigation after two senior officials with the U.S.-led coalition authority reported that Shaw had demanded that they make the changes to the contract. They refused. Daniel Sudnick, who was the senior advisor to Iraq's minister of communications, the highest-ranking American in the ministry, and Bonnie Carroll, a chief deputy, resigned this month.

A Pentagon spokeswoman said the inspector general was "unable to discuss this matter at this time."

Carroll declined comment Wednesday. Sudnick issued a statement denying Shaw's charges of corruption in the original cellular license award that he helped to oversee.

"Together with my team, we were singularly instrumental in putting modern communications in place that never existed in Iraq before," Sudnick said. "No one, doing it properly and carefully, and avoiding the misuse of taxpayers' dollars, could have done it any faster."

The inquiry into Shaw's actions is believed to be the first for a senior Pentagon official in connection with the massive $18.4-billion package funded by U.S. taxpayers to help rebuild Iraq.

According to contracting experts, Shaw's behavior raises several concerns.

First, contracting officials, not political appointees, are supposed to have full discretion when issuing government contracts. Second, promoting a private company led by friends could present conflict-of-interest issues.

Finally, criminal charges could result if there were any financial ties between Shaw and members of the consortium.

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Pieced together from e-mails, documents and interviews with sources in the coalition, telecom industry and Department of Defense, the story of the battle over Iraq's new cellphone network began soon after the U.S. attack on Iraq on March 19, 2003.